Software licence models explained: subscription, perpetual and usage-based
Subscription, perpetual or usage-based: choosing the right licensing model can save tens of thousands of pounds. Here is a clear overview of all models, their pros and cons, and how you make the right choice.
- 20 May 2025
- 5 min
Subscription, perpetual, usage-based, per user, per core or per server: the landscape of Software licence models has become more complex in recent years. That complexity costs organisations money, because the wrong model means consistently overpaying.
The three main models
Subscription
The most common model. You pay periodically, monthly or annually, for access to the Software. Advantages: always the latest version, low entry costs and flexible scaling. Disadvantages: no ownership, higher costs over the long term and price increases upon renewal.
Perpetual
You purchase a licence once and pay annually for support and maintenance, often a fixed percentage of the purchase price. Advantages: ownership and predictable costs. Disadvantages: a higher initial investment and no entitlement to new versions without an upgrade. Increasingly, Software vendors are discontinuing this model.
Usage-based
You pay based on actual usage, such as the number of transactions, amount of stored data or number of active users. Advantages: costs follow use. Disadvantages: unpredictable invoices during peaks and hard to budget for.
Hybrid models
Many Software vendors combine models. Since the Broadcom acquisition, VMware is only sold as a subscription per core; other parties combine hardware with Software subscriptions or work with tiered pricing per number of users. Such models make comparing alternatives difficult. That suits the Software vendor well.
How do you choose the right model?
The choice depends on expected usage duration, stability of use and the importance of ownership. Always calculate total costs over at least three years; only then is it clear which model is truly more advantageous.
How SoftVaro helps
SoftVaro calculates the models for your situation and negotiates on your behalf about the model and terms that fit best.
Frequently Asked Questions
The most commonly asked questions on this topic.
Which is more cost-effective: subscription or perpetual?
A subscription gives you the latest version and lower entry costs but higher ongoing expenses. With a perpetual licence, entry costs are higher but you own it. Which is more cost-effective depends on duration and support costs. Note: more and more Software vendors now offer subscriptions only.
When do you choose usage-based?
Usage-based is suitable if usage varies greatly. You only pay for what you use, but costs are harder to predict. For stable usage, a fixed licence is often more economical.
How do you choose the right licensing model?
Have the total costs calculated over at least three years, including support, upgrades and any exit costs. SoftVaro assists with this analysis and negotiates the model that suits your situation.
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